21 Sep 2016 Story Sustainable Development Goals

Is Africa’s Natural Capital the Gateway to Finance Its Development?

Africa is rich in natural resources ranging from crude oil, natural gas, minerals, forests and wildlife. The continent holds a significant proportion of the world’s natural resources, both renewables and non-renewables. In order for Africa to reap the economic and social benefits inherent in this natural wealth, it is necessary to urgently address such issues as the proper management, economic and environmental impact of their exploitation.

In most African countries, natural capital accounts for between 30% and 50% of total wealth. Over 70% of people living in sub-Saharan Africa depend on forests and woodlands for their livelihoods. Land is an economic development asset as well as a socio-cultural resource. However, a significant share of these resources is used unsustainably while others are lost through illegal activities, meaning that the stream of benefits generated from these resources is being reduced over time. For instance, Africa loses an estimated USD 195 billion annually of its natural capital through illicit financial flows, illegal mining, illegal logging, illegal trade in wildlife, unregulated fishing, environmental degradation and loss among others. Despite the efforts taken to address them, these illegal activities continue, at times under the watch of the very systems put in place to curb them.

African states now acknowledge that natural capital could be the key to unlocking Africa’s potential and for pulling millions out of the poverty trap. This change in mindset is evident at national levels and in action through political processes such as the African Ministerial Conference on the Environment (AMCEN). AMCEN recognizes that natural capital underpins the continent’s economy, affirming that using natural capital as a getaway to wealth creation and investments will allow for actions towards achievement of the United Nations 2030 Agenda on Sustainable Development and Sustainable Development Goals (SDGs), and the AU Agenda 2063 through financial, economic, social and environmental contribution.

Natural capital is often caught between local short-term objectives and global objectives, which has often left the developing South in a vicious cycle of conflicts and poverty. But this can change. Developing appropriate strategies and partnerships that are truly responsive to country needs can enable the continent tap into its natural capital base and use it as a getaway to investments in reversing environmental losses and accelerating development. Africa’s prudent harnessing of natural resources through value addition can ensure timely, prioritized and adequate financing for programmes aimed at achieving sustainable socio-economic development. Some steps that governments take can include:

  • Implementing the African Regional Flagship Programmes of AMCEN;
  • Increasing productivity in the use of natural resources, such as in renewable energy, to enhance economic and social benefits for poverty reduction, job creation and sustainable development; 
  • Implementing existing mechanisms such as the Gaborone Declaration on Sustainability in Africa, and strengthening governance mechanisms to help value, account and manage its natural capital at national, regional and global levels;
  • Strengthening partnerships with the private sector, financial institutions, research and academic community in developing centers of excellence for natural capital harnessing;
  • Ensuring that the status of natural capital in national planning and financing is elevated to that of strategic national resources, is managed and used in that context in order to secure its sustainability and contribution to economic development and environmental stability.

The above measures among many others, can serve to reverse the losses from natural capital to help the continent free resources that can finance implementation of the aforementioned development agendas. Africa must accept the harsh reality that international public support through foreign aid to developing countries is declining and as such, cannot sustainably finance Africa’s development; besides, developed countries also have their targets to meet for the SDGs.

This fact was echoed in the Addis Ababa Action Agenda on Financing for Development, which in a nutshell, declared that significant domestic resources are critically needed to tackle and achieve the SDGs, including a range of private, public, and blended finance tools that need to be ramped up at all scales. Africa has no choice but to make use (and curb wastages) of its own domestic resources, such as through current earnings from natural capital. These ‘freed’ resources can then be allocated to priority catalytic natural capital-based sectors, such as in enhancing agro-productivity and clean energy access that are capable of catalyzing achievement of the SDGs.

“What is needed in Africa is to embrace the actions and policies which can enable the integration of natural capital into design and implementation of development policies like industrialization and poverty alleviation,” says UNEP Expert, Pushpam Kumar. He adds that Valuation and Accounting of Natural Capital (VANTAGE) initiative of UNEP has been demonstrating the application of tools and approaches through which mainstreaming of natural capital is possible. Piloting of work in water sector in Morocco (Agadir) and South Africa (Eden), natural capital accounting in Ethiopia, Tanzania and Zambia and estimation benefits on restoration in Kenya and benefits of land degradation neutrality under ELD in Africa are some of the best examples in the Continent. They promise possibilities of meanistreaming natural capital.

Africa needs to urgently take policy, institutional and legal measures and reforms to a new level if it is to win the battle in reversing the losses accrued from mismanagement of natural capital. The benefits that would flow are plenty. For instance, injecting revenues from natural resources into agricultural productivity can simply increase crop yields by ten per cent, which equates to a seven per cent reduction in poverty. Providing access to clean and safe energy will not only make it more affordable for citizens, but will reduce the air pollution that kills 12.4 million people globally, and 600,000 people annually on the continent. Reversing environmental degradation and prioritising healthy ecosystems will not only combat climate change but will also help tackle desertification and reduce biodiversity loss.

On governance, more can be done to enhance transparency and accountability in management of natural resources through investor accreditation in credible global processes such as the UN Global Compact, the Kimberley Process and the Extractives Industry Transparency Initiative (EITI). At least half of African countries are members of the EITI, a global transparency standard for improving governance of natural resources. African governments should compel foreign investors to sign the EITI, which would let Africans see which and what foreign companies pay for licenses to exploit their natural resources. In addition, governments should also be open for scrutiny in assessing any resource exploitation deals they strike with foreign partners.  By the same token, addressing the rampant corruption that is rife and linked to exploitation of natural resources is fundamental to protecting the continent’s wealth.

Action is long overdue. The legacy debate on natural resources is becoming stale and is losing its appeal, demanding an urgent shift from ‘business as usual’. African governments must swiftly translate the many bold decisions and statements made on natural capital into practical actions and solutions at national levels for the benefit of their population. Collectively, the continent has a lot to gain in pulling together and harnessing its vast natural capital to finance the development agenda towards greater prosperity; and it must also ensure that future growth and exploitation of natural resources is results-oriented, climate resilient, and sustainable.

For more information, please contact: Mohamed Atani, Regional Information Officer at: Mohamed.atani [at] unep.org +254727531253